Cyprus is an island situated in the north eastern Mediterranean Sea at the crossroads of Europe, Asia and Africa. The capital city is Nicosia, which has a population of about 200,000 people. Cyprus gained independence from Britain in 1960 and adopted a presidential system of Government with elections for the President taking place every 5 years. In 1974 Turkey invaded Cyprus and has since occupied the northern 40% of the island. There are ongoing and longstanding negotiations to reunify the island. The official languages are Greek and Turkish but English is widely spoken and is the language mostly used in business, government and the courts. Laws are based on the English legal system and company law is modelled on the UK Companies Act 1948. Cyprus has been a full member of the European Union since 2004 and adopted
the euro as its currency in 2008. Communications are excellent.
A Cyprus company is defined as a limited liability company incorporated in the Republic of Cyprus. Cyprus companies have the following characteristics:
The main features of the Cyprus tax regime are as follows:
• A uniform corporate tax rate of 12.5% is applied to all companies.
• Dividend income is exempt from tax in Cyprus. It is also exempt from the special defence contribution of 20% provided that the company paying the dividend either engages directly or indirectly in activities that give rise to more than 50% non-investment income or the burden on the dividend paying company’s income is not lower than 5% irrespective of its source, provided certain conditions are satisfied. Credit for foreign tax suffered is given irrespective of the existence of a treaty.
• Dividend income is exempt from tax in Cyprus.
• It is also is exempt from the special defence contribution of 20% provided that the company paying the dividend either engages directly or indirectly in activities that give rise to more than 50% non-investment income or the burden on the dividend paying company’s income is not lower than 5% irrespective of its source, provided certain conditions are satisfied. Credit for foreign tax suffered is given irrespective of the existence of a treaty.
• Interest income is exempt from corporate tax, unless it is received in the ordinary course of business in which case it is taxed like normal trade income. A special defence contribution of 30% is payable by tax residents but credit is given for foreign tax suffered irrespective of the existence of a treaty.
• Profit from the disposal of securities is exempt from tax in Cyprus.
• Profits of a permanent establishment maintained abroad by a Cyprus company are exempt from tax in Cyprus subject to certain conditions.
• There is no withholding tax on dividends paid to non-resident shareholders.
• There is no withholding tax on interest payments made abroad.
• There is no withholding tax on the payment of royalties derived from outside Cyprus.
• Various reliefs are introduced on company reorganisations.
• Group relief is introduced.
• Losses can be carried forward 5 years from 1/1/2013.
The above benefits, coupled with the fact that Cyprus has an extensive tax treaty network with more than 50 countries, provide an environment in which very advantageous tax structures can be put in place using a Cyprus company.
A minimum of one shareholder is required and details appear on the public file but anonymity can be
retained by the use of nominee shareholders. Bearer shares are not permitted.
A minimum of one director is required and details appear on the public file but anonymity can be retained
by the use of third party directors. There is no legal requirement that the directors be Cyprus resident but in
order to obtain relief under the taxation treaties signed by Cyprus it is likely that the company would need
to be seen to be Cyprus resident and therefore have a majority of the directors based in Cyprus.
Companies need to comply with the following filings annually:
1. Submission of the company annual return to the Registrar of Companies
2. Submission of audited financial statements in Greek to the Registrar of Companies
3. Submission of an annual company income declaration to the Income Tax Authorities
4. Submission of provision tax returns on 31st July in the tax year and final tax returns on 31st December of
the year following the end of the tax year to the Income Tax Authorities
Normally it will take approximately 5 working days from the receipt of due diligence documentation on
the beneficial owners for incorporation to be achieved. In special circumstances an accelerated process is
available which would allow incorporation in 2-3 working days after receipt of those references. Ready
made companies, whilst not generally available, can be provided on request.
As a matter of local company law the company MUST maintain a registered office address within Cyprus
and must also appoint a company secretary who, for practical reasons, must be resident in Cyprus. We
would normally provide these services as part of our domiciliary service fee.